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Behavioral and personnel economics

Articles in behavioral economics discuss the emotional and cognitive factors that influence the decisions of actors, in particular employers and employees. Personnel economics analyzes the internal organizational strategy of the firm and the human resource management practices chosen to pursue that strategy.

Poor public transport can reduce employment in
the formal sector

Public transport infrastructure has not kept up
with the demands of growing populations in cities in developing countries.
Infrastructure provision has historically been biased against less affluent
areas, so access to formal jobs is often difficult and costly for a large
part of the lower-income population. As a result, low-income workers may be
discouraged from commuting to formal jobs, lack information on job
opportunities, and face discrimination. Through these channels, constrained
accessibility can result in higher rates of job informality. Reducing
informality can be a target for well-designed transport policies.

Higher levels of air pollution reduce worker
productivity, even when air quality is generally low

Environmental regulations are typically
considered to be a drag on the economy. However, improved environmental
quality may actually enhance productivity by creating a healthier workforce.
Evidence suggests that improvements in air quality lead to improvements in
worker productivity across a range of sectors, including agriculture,
manufacturing, and the service sectors. These effects also arise at levels
of air quality that are below pollution thresholds in countries with the
highest levels of environmental regulation. The findings suggest a new
approach for understanding the consequences of environmental
regulations.

How different procedures might succeed in
settling disputes

Alternative dispute resolution procedures such as
arbitration and mediation are the most common methods for resolving wage,
contract, and grievance disputes, but they lead to varying levels of success
and acceptability of the outcome depending on their design. Some innovative
procedures, not yet implemented in the real world, are predicted to improve
on existing procedures in some ways. But controlled tests of several
procedures show that the simple addition of a nonbinding stage prior to
binding dispute resolution can produce the best results in terms of cost
(monetary and “uncertainty” costs) and acceptability.

Blind recruitment can level the playing field
in access to jobs but cannot prevent all forms of discrimination

The use of anonymous job applications (or blind
recruitment) to combat hiring discrimination is gaining attention and
interest. Results from field experiments and pilot projects in European
countries (France, Germany, the Netherlands, and Sweden are considered
here), Canada, and Australia shed light on their potential to reduce some of
the discriminatory barriers to hiring for minority and other disadvantaged
groups. But although this approach can achieve its primary aims, there are
also important cautions to consider.

Firms’ concerns about the well-being of their
employees are largely supported by the evidence

Recently, large companies like Google have made
substantial investments in the well-being of their workers. While evidence
shows that better performing companies have happier employees, there has
been much less research on whether happy employees contribute to better
company performance. Finding causal relations between employee well-being
and company performance is important for firms to justify spending corporate
resources to provide a happier work environment for their employees. While
correlational and laboratory studies do find a positive relationship, the
evidence remains sparse.

Donors rely on overhead costs to evaluate
charities, but that reliance creates disincentives for charities to hire
skilled workers

Charity rating agencies often focus on overhead
cost ratios in evaluating charities, and donors appear to be sensitive to
these measures when deciding where to donate. Yet, there appears to be a
tenuous connection between this widely-used metric and a charity’s
effectiveness. There is evidence that a focus on overhead costs leads
charities to underinvest in important functions, especially skilled workers.
To evaluate policies that regulate overhead costs, it is necessary to
examine whether donors care about overhead costs, whether they are good
measures of charity effectiveness, and what effects a focus on overhead
costs has on charities.

The impact of part-time workers on firms’
productivity is unclear, and lower wages depend mainly on occupation and
sector

About one in five workers across OECD countries
is employed part-time, and the share has been steadily increasing since the
beginning of the economic and financial crisis in 2007. Part-time options
play an important economic role by providing more flexible working
arrangements for both workers and firms. Part-time employment has also
contributed substantially to increasing the employment rate, especially
among women. However, part-time work comes at a cost of lower wages for
workers, mainly because part-time jobs are concentrated in lower paying
occupations and sectors, while the impact on firms’ productivity is still
not very clear.

Workers care about employers’ social causes, but
the public sector does not attract particularly motivated employees

Employees show more commitment to an employer
that promotes the greater good, and they work harder too. Moreover, many
people are willing to give up some of their compensation to contribute to a
social cause. Being able to attract a motivated workforce would be
particularly important for the public sector, but this goal remains elusive.
Indeed, there is evidence for the public sector that paying people more or
underlining the career opportunities (as opposed to the social aspects)
associated with public sector jobs is instrumental in attracting a more
productive workforce, without having a negative impact on intrinsic
motivation.

A good boss can have a substantial positive
effect on the productivity of a typical worker. While much has been written
about the peer effects of working with good peers, the effects of working
with good bosses appear much more substantial. A good boss can enhance the
performance of their employees and can lower the quit rate. This may also be
relevant in situations where it is challenging to employ incentive pay
structures, such as when quality is difficult to observe. As such, firms
should invest sufficiently in the hiring of good bosses with skills that are
appropriate to their role.